A 360 residue region encoded by the neurofibromatosis type 1 (NF1) gene shows significant homology to the catalytic domains of both mammalian GTPase-activating proteins (GAP) and yeast IRA proteins. This GAP-related domain of the NF1 gene (NF1-GRD), like the GAP and IRA protein, has been reported to mediate hydrolysis of Ras-bound GTP to GDP, resulting in inactivation of Ras protein. In the present study, we identified two different types of NF1-GRD cDNA. One (type I) is identical to the previously reported sequence, and the other (type II) contained an additional 63 bp insertion that encodes for a region of 21 amino acids in the center of the NF1-GRD molecule. Alternative splicing is the most likely mechanism by which these two types of transcripts arise. Our observations reveal that the type I transcript is predominantly expressed in undifferentiated cells, whereas the type II transcript predominates in differentiated cells. Furthermore, the expression pattern of type I and type II NF1-GRD mRNA immediately changed in SH-SY5Y neuroblastoma cells when neuronal differentiation programs were induced by retinoic acid treatment. We propose that the differential expression of type I and type II NF1-GRD transcripts might be an 'on/off' switch that regulates the catalytic activity of the NF1 gene product, which plays an important role in the regulation of neuronal differentiation.